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Tuesday, August 10, 2004 - Page updated at 12:00 AM

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India a mixture of old ways and new technology

Seattle Times technology reporter

Third in a four-day series

HYDERABAD, India — A motley collection of heavy traffic passes a wide spot in the road below Microsoft's ninth-floor offices here.

Dump trucks carry construction crews and equipment to nearby sites, where futuristic buildings reach skyward. Cows wander in their midst, and barefoot delivery boys lug pots of tea and lunch tins to and from makeshift cafes to builders and office workers.

Then there are the sightseers. A stream of locals comes by foot, motorcycle and car to gaze at the tangible evidence of India's rising stature in the world.

Yet not all of India is feeling the benefits of the soaring economy and surging technology industry. The contrasts are jarring between ancient and modern India, its rich and its poor, its triumphs and its challenges, especially in cutting-edge cities like Hyderabad.

And despite their pride in the country's rising stature, Indians are divided over whether the new prosperity is trickling down to the masses. They recently voted out of office the business-oriented leaders who took credit for the country's growth.

Statistics reflect just how much the tech boom is affecting India: While health and literacy show widespread signs of improvement, much of the country remains mired in deep and stubborn poverty. Only 403 million of India's 1 billion people have work, and per capita income averages just $470 a year.

A transformation is evident in Hyderabad, where multinational high-tech corporations have flocked to take advantage of India's highly educated but affordable programmers. Some locals bristle at the Western influences — traffic jams, skyrocketing real-estate prices, Americanized values — that are changing this ancient city.

Others marvel. They pose their children in front of the buildings for snapshots, just as Seattleites do at the Space Needle and Experience Music Project.

"People love to have these places," says Mohammed Najeeb Khan, a Hyderabadi taking photos of visiting relatives in front of the building where Microsoft works out of a rented campus.

Khan has a graduate degree and works at an advertising agency. He's "extremely proud" of the progress of his city.

But he plans to leave soon, for a job in England — "to earn money, more money," he says with a big smile.

Intercity competition

Hyderabad changes not unlike those in Seattle in late 1990s

They won't show up in Khan's picture, but 350 Microsoft engineers work behind the building's mirrored glass windows. The company came in 1998 to take advantage of the local talent, build new products and catch up to competitors such as Oracle and Sun Microsystems that have larger Indian subsidiaries.

Similarly, Hyderabad is playing catch-up to Bangalore, a city to the east that emerged as India's Silicon Valley in the 1980s.

While the U.S. tech workers fret about competing with Indians for jobs, cities in India are competing among themselves for their share of the tech boom. Foreign investment and companies are pouring in, and cities across the country are in a beauty contest similar to Texas, Alabama and Washington state's competition for Boeing's 7E7 project last year.

Microsoft is frequently mentioned in Hyderabad's aggressive self-promotion, and it was a coup for the city and the surrounding state of Andhra Pradesh when the company decided last year to build a new campus here.

Most of the tech recruitment in this otherwise predominately agricultural state is concentrated in the sparsely developed suburb of Madhapur, where a special-development zone called Hitec City was created in the late 1990s.

The state's Web site promotes the 67-acre zone as "an integrated techno-township, a concept that provides world-class infrastructure facilities for the IT industry under one roof."

The state has designated 5,000 acres around Hitec City as Cyberabad "to give a fillip to the development of IT infrastructure," according to a state report.

Andhra Pradesh was led until May by a tech-savvy governor who invested heavily in luring software, electronics and biotechnology companies. His goal was to double industrial production in the region every five years and make it India's most-industrialized state by 2020.

In addition to expedited permits and tax breaks, the government provided wide roads, improved utilities and built a large convention center.

The effort apparently paid off. Andhra Pradesh's software exports quadrupled from 1998 to 2000, from $62 million to $238 million, according to the state commerce plan.

In some ways the change in Hyderabad is similar to Seattle's transformation in the late 1990s. Clusters of fancy apartment buildings have sprouted near Microsoft's new campus, and the government is developing sports stadiums. There's talk of a highway linking the area to the airport and of a mass-transit system.

Pride and ambition

Bill Gates symbolizes the possibilities that await

Already the city has a wide, tree-lined boulevard from the airport to the hotels downtown, a sharp contrast to the gridlocked arterials in Bangalore, where roads are overwhelmed by growth.

The government also upgraded the airport, providing bright tiled passenger walkways. And it added a large sign announcing the next industry it's cultivating: "Welcome to Genome Valley, the Biotech Hub of India."

One of the big growth industries here is construction, says Amit Jain, a rebar salesman in wraparound black sunglasses who calls on Hitec City construction sites on a motor scooter. A native of Hyderabad, Jain has watched the rocky orange tundra on the edge of town transform into a field of glistening buildings with names such as Cyber Pearl.

"It was a rocky mountain," Jain says. "Now it is a fine place of Hyderabad, of India."

Microsoft was among the first tenants in Hitec City's debut building, Cyber Towers, which the prime minister of India opened in 1998. Neighboring tenants in the 580,000-square-foot building (about the size of medium-size towers in downtown Seattle) include Oracle, GE Capital, Toshiba, Infosys and HSBC.

Globalization brought not just buildings, jobs and money to this part of India, but entrepreneurial zeal. And now, more ambitious tech workers can stay home to seek their fortunes.

For some, Bill Gates represents the possibilities, says Rajiv Kumar, an India-born Microsoft manager who came from Redmond last summer to build a product-development team.

"I know people in India are looking at Bill and saying, 'Boy, I could do this,' " Kumar says. "Maybe not that much, not like $50 billion — but maybe $5 million, maybe $1 million."

Some friends are staying in India to start new businesses, Kumar says. Others are looking to new frontiers in the developing world, like China.

Not that an entrepreneurial streak is new to this area.

Long known for its jewelry trade, Hyderabad developed a pool of experts in processing pearls and continues to be a center of the world's pearl trade. It produces jewelry on behalf of companies in Japan, for instance, even though it's far from the ocean.

Hyderabad also had a reputation for lavishness that came from the Nizams, a dynasty that ruled the region from 1724 until 1948 and grew rich in part from diamond mines. By the early 1900s their indulgences in jewelry, Rolls-Royces and lavish palaces were widely reported.

In the first half of the century, the last Nizam was believed to be the richest man in the world.

At the beginning of this century, the city has embraced today's richest man, Gates, who was treated like royalty during visits in 1997 and 2002.

2 tales of 1 city

Ancient trades co-exist with the latest technology

Signs of the city's old and new prosperity are striking.

In the old city is a wealth of Muslim architecture and fairy-tale Nizam palaces, including one that's now a hospital.

While companies in the suburbs not far away are on the cutting edge of business — tackling global markets — commerce in old Hyderabad has barely made it past the Industrial Revolution.

In a neighborhood where shoes are sold, retailers line the streets, their goods hung from nails — tennis shoes, loafers, high heels, Indian dress shoes and a thousand varieties of sandals.

Behind their shops are warrens of stalls occupied by shoe wholesalers, who sit among ceiling-high stacks waiting for customers. Down the side streets are specialized shops supplying this little industry — some sell bundles of shoelaces, others leather, and still others pre-made shoe uppers.

Here and there on the curb, other entrepreneurs hack shoe soles out of used tires and stack the soles in neat bundles for resale.

In other areas of downtown, meanwhile, signs of growing prosperity are evident. The retail area near the business hotels, for instance, has big-windowed shops selling jewelry, cellphones and imported cars. There are shops selling fruit smoothies, fancy restaurants and coffeehouses with Internet access.

New two- and three-story houses for the growing middle class are under construction in the neighborhoods between the old city and Cyberabad, and chauffeured cars line up to collect children from new private schools.

"India is going through the same phase as dot-com (did) in the U.S.," Kumar said. "The explosive growth, and the feel-good factor — that feeling, that positive thinking in people.

"If you look at the Sensex, which is our Dow Jones kind of thing, there is a peak. You go to the movie house or you go to restaurants, you see a lot more energy — people talking business, they talk about going abroad, they talk about doing this and that, just like in the U.S., everybody wants to open a company."

Changes began in earnest after economic reforms, launched in 1991, opened India to not only technology companies but also foreign consumer products. Such changes make the prospect of returning to India more palatable for people such as Kumar, who grew accustomed to the variety and quality available in the U.S.

Kumar recalls that a friend who moved back five years earlier couldn't find a certain cereal his children liked.

"It's not that he's going to go hungry, but he misses that, right?" Kumar says. "But now that's not true. You can get any cereal in India."

Some advances

Progress made in key areas but not all share in its benefits

For all that progress, India still has a long way to go.

Clean water is in short supply in rural areas. The World Health Organization says life expectancies are cut short by air pollution from the practice of burning cowpies to cook food on open fires.

World Bank statistics for India suggest progress and challenges in other areas: Child labor fell by nearly half from 1980 to 2002, but 12 percent of children aged 10 to 14 still work.

The percentage of the population with access to sanitation facilities nearly doubled from 1990 to 2002, from 16 percent to 28 percent. Similarly, the percentage with access to an improved water source grew from 68 percent to 84 percent.

But progress was not enough to satisfy the predominantly rural population, which apparently felt left out of the technology-driven prosperity in urban Hyderabad. Voters last spring defeated Chandrababu Naidu, the trade-savvy governor credited with transforming the region into a tech hub, and replaced him with a populist challenger who promised free electricity to farmers.

A similar changeover occurred in the national election as voters rejected the leading party and its "India Shining" theme that celebrated the country's economic progress.

There was evidence before the election that India's gains from globalization and technology were not trickling down. The country received $4.1 billion in foreign business investments last year. Even more cash came into the country from Indians prospering at jobs overseas, including positions in the U.S. tech industry; they sent back $8.4 billion.

Throughout the 1990s, India's growth supercharged South Asia, driving 5.5 percent annual growth in the region's gross domestic product.

That helped reduce South Asia's extreme poverty, the proportion of people living on less than $1 a day, from 41 percent to 31 percent during the decade. But the region's population also grew rapidly, so the total number of people living in extreme poverty fell by just 34 million since 1990, to 428 million in 2001, according to the World Bank.

Meanwhile, basic infrastructure needs across South Asia "remain largely unmet," according to the World Bank.

Still, conditions in the state of Andhra Pradesh, including Hyderabad, indicate progress. In addition to citing industrial projects and export tallies, the state's annual commerce report noted that the infant-mortality rate — reflecting the availability of health facilities, nutrition and awareness — decreased 23 percent from 1981 to 2001.

India's rate of spending on education is comparable to that in upper-middle-income countries, but the size of its average primary classes, 40 students per teacher, is roughly twice as large.

Almost all children enroll in primary school. College enrollment grew over the past decade, from 6 percent of the population to 11 percent, but still lags behind wealthy countries, where two-thirds of students enroll in college.

Whatever the statistics suggest, the progress is remarkable to Kumar, who had left India before the economic reforms, before Hitec City, before India transformed itself from a place the world pitied to a poster child for advocates of globalization.

"There is poverty, but most of even poor people are pretty well educated," he says. "Education doesn't mean that you have a good life or money, unfortunately — a lot of people who are educated don't have jobs. At least that used to be true 10 years back.

"But I think things have changed dramatically in the last five to seven years. There are a lot more global companies, there are a lot more jobs, there's a lot of growth in India."

Brier Dudley: 206-515-5687 or bdudley@seattletimes.com

Ami Vitale is a freelance photographer working in India. Her email address is ami@amivitale.com.

Copyright © 2004 The Seattle Times Company

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